The Intrest on capital is an income of the frim
Answers
Answer:
Interest on capital is an expense to the firm and is debited to the profit and loss appropriation account. Interest is payable to the partners and hence, the partner's capital account is credited with the amount of interest. In case of loss, no interest will be allowed on capital.
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Answer:
ANSWER
Interest on capital is paid by the firm on the partners capital. The firm uses the capital and thus, pays interest on it. As the firm pays the amount of interest it is evident that it is an expense and not the income of the firm. The firm has to pay interest @ 6% p.a. to the partners in the absence of any agreement. The journal entry is:
Interest on Capital A/c.............Dr.
To Partner's Capital A/c
(Being interest on capital due to the partners).
Explanation:
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